Why the Affordable Care Act Is Making Health Insurance Agents Extinct
The Affordable Care Act (ACA) promised health insurance for everyone — insurance that would be easy to get and easy to afford. Just select your brand and flavor, put in your money, and enjoy instant coverage. So, is this a bad thing, a good thing or a mix of both?
In many ways, this type of vending machine health insurance provides convenience, but it does not come without a cost. Just as the soda fountains of the 50s gave way to the vending machine, individualized service in the health insurance industry dwindled when the ACA was implemented. Take a look at how the ACA has affected both the insured and the health insurance industry, particularly health insurance agent compensation.
How Has the ACA Affected Health Insurance Commissions?
Unless you work in the health insurance industry, you’re probably unaware of the stipulations put on insurance companies that participate in this government health plan. To be a participating insurer under ACA, you have to show that 80 percent of premiums collected goes to cover medical costs and only 20 percent is used for administrative expenses.
Where does insurance agent compensation fit? It fits in the 20 percent for administration costs, of course. So, when the insurance companies cut expenses to maintain the 20/80 ratio, they have to either cut the percentage they pay in health insurance commissions to agents or they have to cut the number of agents available to service clients — they may even have to do both.
Some insurance agents have seen health insurance commissions cut in half, and some have seen them eliminated altogether. Many of those agents left the health insurance industry for occupations that allow them to maintain the income level they were accustomed to.
How Does Lower Insurance Agent Compensation Affect the Consumer?
You might assume that the cost a consumer pays for insurance goes down when an insurance company decreases insurance agent compensation, but that’s not necessarily true. The ACA 20/80 stipulation does not affect insurance company profits; it only affects their expenses. A company could actually keep premiums the same, while increasing profits by cutting agent compensation. The ones who suffer a financial hit are the insurance agents and the consumers.
The bottom line is that consumers lose the level of service they deserve and need while still paying as much, or more, for health insurance.
Simplicity Can Mean You Get Less
Let’s go back to the soda fountain versus the vending machine analogy. At the soda fountain counter, if you wanted to combine two different flavors, all you had to do was ask. That’s where Cherry Coke came from. If a new flavor came in, the soda jerk would tell you about it right away. He might even let you have a free taste. This level of service is not available through a soda vending machine. You might get it by ordering an Italian soda at your local coffee shop, though.
Health insurance comes in many more flavors than soda pop. And, to the consumer, the benefits within a package are much more important than the tantalizing of taste buds. Simplifying the process of health insurance selection to clicking boxes on a website means you lose some things. You do without the personal service of an insurance agent who can explain the differences between policies and answer questions that aren’t listed on the FAQ page. You also miss out on personal advice from an agent who genuinely cares about you and your family, not to mention the personal attention you need when you don’t receive what you thought you were buying.
How Can We Save Health Insurance Agents from Extinction?
The answer for both agents and consumers is one that combines the best of technology with old-fashioned personal service. Offer the convenience of website access to a wide range of plans, but don’t leave it at that. Have well-trained, certified health plan experts available to walk through the process with every single applicant. Health insurance agents will continue doing what they do best and be compensated fairly. Meanwhile, the consumers get what they want and need — personalized guidance through the process by a real person who cares.
The health plan marketplace doesn’t have to be the nightmare it has become. Anytime you remove the human element from a situation, you lose flexibility. The process becomes rigid, unyielding and unforgiving for those trying to navigate the unfamiliar. This is especially true in the complex world of health insurance coverage.
A New Opportunity for Health Insurance Agents
BuyHealthInsurance.com is a free resource that puts personalized human interaction back into the process and gives the consumer what they want. Every single individual who contacts us is connected to a personal insurance agent, someone who can answer their questions, give them guidance, and when necessary, expedite the process.
Consumers have responded so positively to our personalized approach that we have grown from 8 employees to over a 100 in just two years. The volume of policies sold far outweighs any downturn in health insurance commissions from the insurance companies. Personalized service from health insurance agents isn’t extinct. It’s just moved to a new platform — BuyHealthInsurance.com.